Listen: MediaTalk | Season 2 | Ep.5 Big Dance, Big Business: Breaking Down March Madness

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Mike Reynolds: Hi, I'm Mike Reynolds, a senior reporter covering the media industry with S&P Global Market Intelligence's tech, media, and telecom news team. Welcome to MediaTalk, a podcast hosted by S&P Global, where the news and research staff explore issues in the evolving media landscape. Today, I'm joined by S&P Global Market Intelligence Kagan Principal Analyst Justin Nielson, who specializes in the broadcast industry. How goes it, Justin?

Justin Nielson: Doing well.

Reynolds: S&P Global Market Intelligence Kagan Analyst Scott Robson is also in the MediaTalk podcast house. How are you doing, Scott?

Scott Robson: I'm doing well, Mike. What a great time of year this is to be a sports fan!

Reynolds: Absolutely. Today, we're going to take a quick run around some of the world of sports business with an eye toward the March Madness college basketball tournament, both on the men's and women's side. Let's get to it. This is the 13th year of two media conglomerates teaming on men's March Madness — CBS Sports, now under the auspices of Paramount Global, and what is now called TNT Sports, owned by Warner Bros. Discovery. It's a unique partnership. Looking back, did you think this was going to work, Justin?

Nielson: It's a great question, Mike. And honestly, this kind of media partnership and joint venture, it hasn't had a good success rate. But this one has, and you just actually expanded the viewership and the access to all of the March Madness games. So overall, it's been a win for both parties.

Reynolds: Scott, it's been a good investment from a rights perspective for the parties. It's a property that's lifted affiliate and retrans fees.

Robson: Yeah, so investing in marquee sports content like this, like the March Madness tournament, has been good business for the networks for decades. We estimate the TV networks pay about $900 million per year under the current contract, which will increase to $1 billion next year when the new deal kicks in. These networks are willing to pay that much because they generate significant revenue off the property through both ad sales as well as by using the content as a justification for operators to carry the networks. So with Warner Bros. Discovery, they've been able to get rate increases for TNT (US), TBS (US), and truTV (US) on the back of the sports rights they carry, like March Madness. This is probably most evident when looking at TruTV. So we estimate that TruTV was charging operators 11 cents per sub per month back in 2010 before they started airing the tournament, and that's nearly tripled to 32 cents today. It's really helped juice the affiliate revenues for some of these networks.

Reynolds: Yeah, that makes lots of sense and dollars as it goes. As you mentioned, Scott, it also works on the ad side. This is a billion-dollar property at this point the top ad sales executives for Warner Bros. Discovery and CBS said the tournament is virtually sold out with volume ahead in the high single digits and pricing up in the mid to high single digits. For 2024, it's supposed to be the top ad revenue-producing tournament to date. Why does it sell so well, Scott?

Robson: Yeah, the tournament is great for advertising. There are a lot of games with varying degrees of viewership attached to them across four different networks for the men's tournament. So advertisers can invest across different levels. As you mentioned, the tournament is virtually sold out, and now a lot of the advertisers lock in multiyear deals. So the tournament starts out being about 50% sold out each year. I think there are around 18 of these companies that lock in these larger sponsorship deals CBS will get the lion's share of that.

However, TBS, TNT and TruTV will be hosting the championship game this year as it bounces back and forth between the two. So they'll see an uptick from last year — and interesting side note: the NCAA doesn't allow ads from gambling companies, so we won't be seeing spots from FanDuel Inc. or DraftKings Inc. during this tournament like we would during other tournaments.

Reynolds: A couple of other things here before we get back to the tournament per se NIL — naming, image and likeness. Essentially, it's an endorsement for college athletes, an incentive for some to maybe pick one school over another, or maybe stay in school. Reportedly, FOX (US) and maybe some of the other networks might have been interested in turning to NIL to keep Iowa's Caitlin Clark, maybe the biggest star in all of college sports, in school for another year. Justin, your take on NIL?

Nielson: Mike, it's been great for the athletes and actually the premier athletes to stay in school, but also it's created some situations where the rich get richer in terms of some of these colleges and major conferences. So you're seeing the top athletes gravitate to those schools that can get the largest NIL money for a particular athlete. And you see a lot of movement, especially in college football and college basketball, in terms of the top players that move from maybe smaller schools to larger schools because of the NIL. It's actually created a lot of the conference realignment that we see now and the demise of the Pac-12, unfortunately.

Reynolds: Justin, you went to Arizona State. How do you feel about the conference's demise?

Nielson: It was a sad day in terms of the Pac-12 tournament and in, the college football season as well. But you saw teams like the Washington Huskies, make the title game. So maybe it's Arizona's chance this year, but it will be interesting because of the regionality of the conferences is broken up. You'll be having teams going, basically cross country for games and you'll look at Stanford and Berkeley as part of the ACC. So it's breaking down those regional barriers and it's becoming more of a national game, to be honest.

Reynolds: With all the conference realignments for the 2024/25 school year, we're reshaping the SEC, the Big 12, the Big 10, as you just mentioned, the ACC, Justin The impact of this kind of programming and viewing, Scott, the rights deals that are in place, though, largely already reflect these changes, right?
Robson: So the new media rights deals for conferences like the Big 10 and SEC are all in place and they reflect that realignment. I think they're really going to help those conferences compete at a level above the rest of the field in terms of being able to provide athletes with better facilities and big game exposure. The Big 10 is getting $1.1 billion per year now, the SEC around $800 million, and then the Big 12 is a distant third at $380 million per year. Fox and ESPN, in particular I think, have made a concerted effort to make those conferences even more attractive by maybe suggesting they add some big programs into the fold. Fox owns a majority share of the Big 10 network. ESPN has the SEC network, so there's a lot of interest in keeping those conferences strong. I think the addition of UCLA and USC to the Big 10 will help ratings for the conference as fans will be excited to see some of those new matchups unfold. And then another interesting wrinkle in all that is NBC putting some exclusive Big 10 games on Peacock.

Reynolds: I gotcha. The upcoming 2024 season, we'll see the expansion of the College Football Playoff to 12 teams and it looks like to 14 in 2026. There's also talk of the men's basketball tournament expanding to 76 teams or maybe 96. Does that make sense, Scott? Or is 68 teams the number we have now? Is that the right number?

Robson: Yeah. When you look at basketball, I think we have the right number. It's worked for decades. It's not broken. No need to fix it. There's money allocated to each conference based on how many of their teams make the tournament. So adding more teams might alter this payout. So the conferences might not want it. More importantly, will viewers be as invested in the earlier round action if the tournament balloons to 96 games? I don't know. I think it might lose some of its appeal with casual fans. Now, to play devil's advocate, as a fan of the Big East, I certainly would have liked to see some more Big East teams at the Dance this year. And then with college football, I think the move to additional playoff games makes sense and it's something that most fans have wanted for a long time.
We saw it again this year with FSU getting snubbed. Many believe that the 14 playoffs were just too few. So I think most people are excited for the 12-team College Football Playoff next year.

Reynolds: Back to the Madness perse, UConn really beat up on San Diego State in the National Championship game last year. It resulted in a record-low audience for the title game of about 14.7 million overall and a tournament average of about 9.6 million viewers across the combined windows on CBS, TBS, TNT, and TruTV. Those are still big numbers in today's TV landscape. Why does this event resonate so well, Justin?

Nielson: I think the unpredictability of the event, it creates a lot of drama. You see this definitely in the first couple of rounds with the lower seeds, taking out some of the higher seeds. The other thing is you have those big brand names in terms of the Dukes The North Carolina's, the UCLA's and such. Yeah, maybe a little bit down just because UConn is new to the scene but they have a deep history and, a great basketball team this year. We'll see what happens.

Reynolds: Viewership is also being stoked by streaming Paramount+, and WBD's Max are in the mix this year. The latter for the first time. There's also March Madness Live Scott, how about the streaming aspect for the tournament?

Robson: Yeah. So streaming is here to stay and more and more sports are being added to the streamers. As you mentioned this year, we have the Max offering tournament games via the Bleacher Report sports add on. I think the addition of Max will help boost the overall viewership, but I wouldn't imagine it making a huge impact this year compared to last. So fans can now watch the CBS games on Paramount+ and the Warner Bros. games on Max. Last year, YouTube TV rolled out their multi-view feature around the tournament, which was a very exciting feature. A lot of people were talking about it. Next year there should also be another virtual multichannel service on the market when the sports skinny bundle with Fox Corp., Walt Disney Co. and Warner Bros. launches. As of now, that service doesn't have CBS (US). So subscribers will have to go elsewhere for those games. And the same really goes for fuboTV Inc., which still doesn't have access to the Warner Bros. networks. So it's not really the best option for fans of March Madness.

Reynolds: Let's turn it to the women. Very strong year in '23 for the ladies the final game LSU over Iowa, 9.9 million viewers and I think is the most viewed college basketball game ever men's or women's on Disney platforms this year's been even bigger. Again, the Caitlin Clark has just been gigantic. Disney/ESPN had its best audience with women's regular season college basketball since 2008, 2009. Viewership up 37 % across 81 games. Guys, what do we think here? The women's game has arrived?

Nielson: Yeah, I think it already has arrived, to be honest. Having a big name like Caitlin Clark and then also just the rise in women's sports viewership, among the WNBA and other leagues I think it's a very star-driven league. You're looking at, big personalities in the game now. And I think it's really resonated

Reynolds: Scott, what do you think?

Robson: Yes, I agree. I think the growing interest in women's basketball is in full swing. Caitlin Clark is out there breaking records for in-person tickets. The games have grown significantly in price. Last year's final was up significantly from the year before. So if they can continue to gain momentum, that would be very impressive. Aside from Clark, you have the Stanford coach passing Coach K to become the winningest coach in college basketball history. So I agree. The women's game has arrived.

Reynolds: I spoke to a top Disney executive, and she said the women's tournament was virtually sold out it's also been a driver to sell inventory in other Disney and ESPN (US) women's sports properties. Disney/ESPN recently renewed the women's tournament as part of a larger deal for all the different NCAA championships. Scott, what's your take on that development?

Robson: Yes, so ESPN recently signed a deal to broadcast. I think it's 40 championships over the next eight years for $920 million. The women's tournament is a part of that deal. NCAA president Charlie Baker says he values that women's tournament around $65 million per year. So that means the women's tournament is driving over half the average annual value, which is huge.

Reynolds: They say a rising tide lifts all ships does it raise all hoops of viewership? If Caitlin Clark's Lady Hawkeyes make a deep run or South Carolina continues its quest for perfection, does the women's tournament take some viewership away from the men's Madness, Justin?

Nielson: I don't know if that's the case, but I think it's definitely a positive outlook for both tournaments, and you see it from the fan base. I have two girls in my home and they're excited about watching somebody that looks like them playing the sport.

Reynolds: Okay, we're getting to the end. Disney picked up the various NCAA championships and that's going to be co-terminus with the men's tournament deal at the end of 2032. Does the NCAA package the two properties together, Justin? Scott?

Robson: Yeah, this is a tough one to call as 2032 seems so far away. I think there are advantages to keeping the tournament rights deal separate. The men's and women's tournaments are on different networks currently. And I think in 2032, there might be opportunities to add additional broadcasting partners into the fold and maximize the total value.

Nielson: It's going to be an entirely different environment in 2032. So we'll see. It could be a streaming platform that comes to the forefront over those years, or you may see a different product than ESPN.

Reynolds: Selection Sunday's behind us guys. Who do you have making the Final Four? Justin, you're stepping to the free throw line.

Nielson: Oh, I think I'm going to go with the favorite UConn and then probably for the Final Four — Arizona, Houston and Tennessee. So I think each one of those teams is on the uptick and we'll see. Tennessee faltered in the conference tournament, but I think they have a very good squad.

Reynolds: Scott, ready to shoot the three here? Or four as the case may be?

Robson: Yeah, I'm going to play it somewhat safe and say UConn, Arizona, Kentucky and Purdue. Really, I'm sure a higher seed will make their way into there, but as far as my brackets concerned, that's what I'm going with.

Reynolds: As for me, I'm going with Auburn, North Carolina, Houston, and Tennessee. Everybody, you can give this podcast another listen in a few weeks and see how well we did with our Final Four forecast. That concludes this edition of MediaTalk. I want to thank Justin and Scott for talking sports business, and March Madness with me.

Nielson: Thanks, Mike.

Robson: Thanks, Mike. Good luck with your brackets, everyone.

Reynolds: You too. This is Mike Reynolds until the next time on MediaTalk. Enjoy the Madness.